Annuity rates are loosely correlated with interest rates. Because interest rates are currently low, annuity payouts are also pretty low right now and go lower as you add more features.

Once you've bought one of these contracts, it can be difficult to get out of it.

The most straightforward type of fixed immediate annuity is a single premium immediate annuity, or SPIA. With a SPIA, you give the insurance company a slice of your assets, and in exchange you receive an income payment, usually monthly, for the rest of your life, much as you would with a pension.

With the most basic type of SPIA, you receive income during the course of your own lifetime, and your income payments cease when you die. That can be a good deal if you're in good health and have longevity in your family. On the flip side, if a retiree were to die early in the life of his contract, the insurance company would go home the winner, pocketing more than it ever paid out.

In addition to buying an annuity to cover your life and your spouse's, you can also add on features that provide benefits to your children or other beneficiaries after you've died. You can also buy a fixed immediate annuity with inflation protection, so that your payment steps up along with prices. But the costs of those extra features can quickly erode your payout.